Why Shares of Cree, Inc. Plunged 16% Today

By Travis Hoium Markets Fool.com

What happened

Continue Reading Below

Shares of LED lighting company Cree, Inc. (NASDAQ: CREE) fell as much as 16.1% on Wednesday after reporting fiscal third-quarter earnings. As of 11:25 p.m. EDT, shares were still down 12.8% on the day.

So what

Revenue for the quarter was down 7% to $342 million, and net loss was $99 million, or $1.02 per share. Even on a non-GAAP basis, net income was just $749,000, or $0.01 per share -- below the $0.04 in earnings analysts expected.

Image source: Getty Images.

Cree also announced a joint venture with San'an Optoelectronics to produce "high-performing, mid-power lighting class LED packaged products" for sales around the world. The idea is to leverage Cree's technology and San'an's manufacturing expertise to expand into the larger mid-power market rather than Cree's traditional high-power market.

Continue Reading Below

Now what

Earnings clearly weren't what investors were hoping and were even on the low end of the guidance given late in March. The new joint venture is also a huge unknown, and we won't even see initial sales until the third calendar quarter of this year. At that point, Cree can expect to see royalties from the venture's use of its patents, but management didn't give an indication as to how meaningful those royalties would be.

Long term, Cree is still struggling to make money despite rising adoption of LED lights. And until it turns the corner and begins to grow consistently and report net income, I won't be jumping into this stock.

10 stocks we like better than Cree
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now...and Cree wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 3, 2017.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.